Dark clouds gather over 249,000 jobs in South Africa

The Beer Association of South Africa (BASA) has opposed the National Treasury’s proposed review of excise taxes in the country. 

It said that tax hikes threaten one of South Africa’s most important industries, which employs over 249,000 people and contributes R96.46 billion to local GDP. 

Over the past decade, excise taxes on alcoholic beverages have steadily increased as part of the government’s efforts to reduce consumption and raise revenue. 

Data from the Department of Transport showed that over 4,000 individuals were arrested for drinking and driving over the most recent festive season. 

This led to Deputy Minister of Transport Mkhuleko Hlengwa proposing increased taxes on alcoholic beverages to reduce consumption. 

Hlengwa explained that not only is drinking and driving resulting in increased fatalities, but increasingly drunk pedestrians are causing accidents on the country’s roads. 

“We have to have a broader conversation as a country about alcohol consumption as South Africa is the fifth-largest consumer of alcohol per capita in the world.”

“We do need to hit the pocket of perpetrators as far as consequences are concerned from offences on the road,” Hlengwa said. 

“What we are looking at with the minister is to go beyond the planned demerit system to be implemented in the future to ensure fines follow the perpetrators.” 

One method to hit perpetrators where it hurts and reduce alcohol consumption is to increase the price of alcoholic beverages. 

“I think a conversation needs to be had about the pricing of alcohol and levies charged on those products, particularly what those funds are used for.” 

“I do not see anything wrong with us instituting a direct levy for the RAF within the alcohol pricing system.”

Hlengwa said that instituting such a levy on alcohol products would not only help reduce consumption in South Africa but also provide much-needed funding for the RAF. 

Furthermore, this will ensure that perpetrators, whether drunk pedestrians or drivers, fund the RAF.

Excise tax increases also threaten alcohol sales and the broader industry, with BASA estimating that every 10% increase in excise tax results in a 4% drop in beer sales. 

The association said that excise tax accounts for around 40% of the final beer price, making it much more expensive than necessary. 

In 2024, excise duty on alcohol increased by between 6.7% and 7.2%. That’s much higher than inflation and what the greater industry asked for. 

For the average user, sin tax means that cigarettes and drinks will become more and more expensive, placing them under financial pressure.

BASA said this threatens the livelihood of 249,000 South Africans whose jobs are supported by the beer sector. This is equivalent to 1 in 66 of all jobs in the country. 

The industry also plays a key role in government finances, paying around R40 billion in tax annually. 

“We appreciate National Treasury’s recognition that South Africa’s excise tax policy requires restructuring,” said BASA’s CEO Charlene Louw. 

“A well-designed system must balance the economic realities of our industry with the country’s socio-economic objectives, ensuring a sustainable and equitable approach for all stakeholders.”

In its submission to the National Treasury, BASA highlighted four key principles that should guide excise tax reform:

1. Economic growth and stability: any changes must support job creation and economic recovery while mitigating the expansion of the illicit alcohol trade.
2. Balanced taxation: excise duties have significant economic consequences, including reduced production, employment losses and misallocated resources. A structured and transparent system will help minimise these negative effects.
3. Encouraging responsible consumption: excise duties already contribute to reducing harmful drinking by influencing affordability. Substantially increasing these duties further is unnecessary and could harm the legal market.
4. Market conditions: South Africa’s slow economic growth and declining real incomes impact beer affordability. Overburdening the industry with excessive excise hikes will exacerbate economic challenges.

BASA made clear that it is opposed to the current tax guidelines for beer, saying that it has unfairly targeted the industry. 

Instead, it has called for a progressive excise duty structure where lower beers are taxed according to their alcohol levels. 

“An effective taxation policy must consider economic realities, consumer behaviour, and industry sustainability,” Louw said. 

“BASA remains committed to working with National Treasury and other stakeholders to develop a framework that balances revenue generation with industry growth and responsible alcohol consumption.”